I’m a staff writer at Forbes covering real estate: from ultra-luxury homes to foreclosures to the people making the deals happen. Until recently, I was a member of our Forbes wealth team, crunching numbers for our Forbes 400 and World’s Billionaires lists. Before that I investigated a former Hell’s Angel for the City Pages of Minneapolis, trekked to the U.S.-Mexico border with the Minutemen for the Orange County Register, and exposed Michael Jackson’s property tax problems for the Santa Maria Times. A born and bred Westerner with strong ties in Minnesota, I love calling NYC home. Twitter: erin_carlyle. Got tips? Email me at ecarlyle@forbes.com.

Ben Bowman’s Minneapolis office, in a renovated brick warehouse, is steps from the Mississippi River. But his mind is on a different circulatory system: blood. As usual, he’s thinking about waste—1.3 million pints spoil, he claims, and get tossed every year in the U.S.—and about archaic distribution. “Can the market really be this inefficient?” Bowman asks, his voice rising a bit. “I spent at least six months calling people saying, ‘Tell me why the market’s like this.’ And the answer we got was, ‘This is the way it’s always been.’”

He’s talking about a supply chain that hasn’t changed in seven decades—a system his General Blood is trying mightily to disrupt. Instead of relying on collection from local donors, then selling to hospitals within driving distance, why not buy cheaply from centers in ­America’s vast midsection and distribute overnight to hospitals on either coast, underpricing rivals like the Red Cross?

But it’s not so easy to disrupt a $4.5-billion-a-year business, even a sclerotic one. For one thing, the tide of supply and demand changes as dramatically as Old Muddy. For another, it’s tough to dislodge old ways of doing things—especially in a market where the biggest player, the American Red Cross, controls 44% of the blood supply and has the ability to distribute nationally, depending on the needs of particular areas.

Using one person’s blood to heal another is an idea that’s been around for centuries. But the first network of collection centers originated in 1930, after Moscow surgeon Sergei Yudin resuscitated a young man who’d slashed his wrists by injecting him with 420cc of blood from a cadaver. It wasn’t until World War II that the staggering demand for blood gave rise to a network of regional U.S. distributors, which is still in place today. The system leads to all kinds of imbalances. A pint of blood might cost a hospital $210 in Wisconsin but $265 in New Jersey.

Bowman, 33, can offer pints at an ­average price of $229. He’s contracted with donation centers along the Interstate 35 corridor—from Laredo, Tex. to Duluth, Minn.—to ship blood by FedExFedEx to hospitals that have agreements with General Blood. Bowman and 30-year-old cofounder David Mitchell guarantee delivery of the mix of types (O+, AB and B–) that hospitals prefer for local populations; blood types vary somewhat by ethnicity (see graphic).

His experience in supply-chain ­management taught Bowman to squeeze more efficiency out of blood distribution. Before getting his M.B.A. from the University of Minnesota he worked at his parents’ company, ­Magnum Machining, which finishes high-precision parts for John Deere and Emerson ElectricEmerson Electric. He opened a maquinaria near Deere’s factory in Torreón, Mexico. Mitchell, a pal from business school, was an investment advisor for Wells FargoWells Fargo.

The two had little trouble raising a total $52,000 (some of it their own) in the spring of 2010 or another $675,000 in a series A round with Minnesota ­investors last July. Certification from the feds, to buy and sell blood that meets FDA standards, proved a snap. All they needed was to open up the tubes and let the blood start flowing, right?

“Selling into hospitals is like storming a castle,” says Mitchell. “They’re not built to buy efficiently. There’s so many different stakeholders in each decision that nobody owns a project.” The first hurdle is the risk-averse hospital lab ­director. Most have never heard of General Blood, and few are impressed with its blood-broker certification.

Even if you get past the lab guard at the gate, you still need an audience with the CFO or whoever is in charge of ordering. Mitchell and Bowman showed up at one hospital in Boston last year ­expecting to sign a contract only to be grilled by ten or more doctors and administrators—who had no intention of doing any business with General Blood.

The company has snagged only two sales contracts: with a two-hospital system in Charleston, W. Va. and a single ­institution in Oakland, Calif. Not yet profitable, General Blood last year grossed 18% on revenue of $500,000. By this time in 2013, thanks in part to approval to sell blood in New York and New Jersey, Bowman expects positive cash flow.

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They’re not even operating inefficiently in this regard, the article is just based on ignorance. There’s a reason blood is kept regionally and not nationally distributed. People in the same region as you are more likely to have been exposed to the same pathogens as you. People in the same region often are of the same descent if you go back far enough, and are more likely to have similar antigens.

If you need B- blood, than B- blood from a donor in your area is FAR less likely to cause a transfusion reaction than B- blood from a donor on the other side of the country.

The idea of distributing nationally to save a couple bucks here and there is reckless, and as a Med Tech, makes me cringe. As a patient, charge me the extra $10 or whatever and get me blood from someone in my area, thanks.

Consider that red blood cells (not whole blood, which is rarely used today) have a shelf life of 42 days, and that the first two day are spent in typing and screeing for infectious disease. It arrives at a hospital on average at day four, and is crossmatched for the first patient, who does not use it ( the most common outcome), and that it may be crossmatched again and again until it approaches the end of its shelf life, at which point expiry is probable. Has the unit been “wasted”? Hardly. It was provided important “insurance” to several patients through its availablity. I speak as a patient as well as a physician. I’ve had several major surgeries and blood was ordered each time, “just in case”, but I’ve never been transfused. I certainly did not consider those units wasted.

Outdating or expiration of red blood cell is really quite low, thanks to the extended shelf life it gained 25 years ago, and to careful blood management by hospitals and blood centers. In addition, there are systems already in place to share blood through the American Red Cross, America’s Blood Centers, and the AABB.

The further reduction in outdating through the proposed blood exchange would trade until near the end of their shelf life, and while they could be truly lifesaving, many hospitals manage their very expensive blood inventory as FIFO not LIFO. This is based on sound medical evidence and proven business models in the industry.

Some hospitals are not closely aligned with a blood supplier and must collect their own blood. For these hospitals, the new company may provide a great service, but only if the hospital is licensed by FDA to send the blood across state lines.

Yes, the system is costly, but it is also necessary to protect patients amd ensure high quality care for them.

Interesting little thing RED CROSS has going ….. get blood for free ….. drive people CRAZY with calls for donations (volunteers provide free services) and they sell it for over $200.00 a Pint … yeppers ! This needs to change !! (:>) ….

The existing maximum time period of 42 days for storing blood can be significantly increased by adding a cryoprotectant prior to storing in the vapor phase of liquid nitrogen. More details at; http://www.cryomedictechnologies.com

Man, I have heard this so many times….people equating the cost of a so called free unit as if the Blood Bank is ripping people off. Couldn’t be further from the truth. Yes, the donor donates if for free but this is mostly at the direction of the FDA so that you don’t get undesirables donating blood. So, the cost of having donor coaches ($350, 000 to $400,000), paying staff to collect, equipment, testing for 13 to 14 different diseases, (some testing machines are $500,000 each), component production, labeling, distribution to the hospitals….after its all said and done a Blood banks bottom line is about 3% if even that. SO, its not free!

Also, do not confuse non-profit with excess revenue over expenses. Non-profits need to be able to grow just like any other organization otherwise they can not keep pace with the growing population. Most Blood Banks do not receive monetary donations as a normal course of business to sustain their company. They charge for the services of collecting, testing, component production, and distribution while under the guidance of federal regulation.

Couple of additional thoughts…our expiration rates are no where near the level indicated in this article ( I do not work for the ARC by the way). Also, probably one reason these guys have a hard time getting sales is that there is already a national distribution system that moves blood and blood components from region to region. About the best these guys will be able to do is to supplement a regional supply since they cant offer the ancillary services provided by a local supplier. Believe me, the blood banking system is not some archaic industry, it is a sophisticated, mature industry that does an outstanding job day in and day out saving lives.

If, instead of direct payment, a donor was allowed to get a full free blood test and/or an additional physical, maybe there’d be more donations from healthy people. I have donated about 10 times, but decided, after seeing the high percentage of people who destroy their own health, that they don’t deserve to get my blood for free nor do i deserve to get stuck by a needle and get weak from blood lose on their behalf. Now that I see how much blood is wasted and that some may also profit from my blood donation, I think I made the right decision.